Personal Loans have become an ideal choice for individuals to cover any expenses without any limitations. With the ease of repayment, this unsecured loan helps individuals to fulfil their dreams. Even if you have an average income, you can avail of a Personal loan with the maximum tenure.
For those who don’t know about the Personal Loan repayment schedule, it is a duration for which the borrower repays the full loan amount, the principal loan amount, and the accrued interest. Some people may find the idea of loan and repayment discouraging, considering it to be a financial burden, but with a bit of planning the benefits are more and you can repay Personal Loans faster than you had planned.
You are given the option to easily return the loan amount within a specific period. You can choose the maximum tenure or minimum tenure for a Personal Loan as per your repayment capacity.
This blog elaborates on the Personal Loan maximum and minimum tenure. So, keep reading further.
What is Loan Repayment?
Loan repayment is the process of paying back a loan to the lending institution within a specific period, as per the terms mentioned in the loan agreement. The loan repayments are made in the form of Equated Monthly Installments (EMIs) that includes both principal loan amount and interest components, paid over a predefined number of months, known as loan tenure. Please note that the EMI may also comprise other small components like insurance and service charges, as per the agreed loan terms.
What is the Minimum & Maximum Loan Tenure Allowed for a Personal Loan Repayment Schedule?
- Personal Loan Maximum Tenure
The maximum loan tenure for Personal Loans varies from one lender to another. However, most financial institutions have set the maximum tenure for a Personal Loan of 60 months, allowing borrowers to repay the loan through lower monthly EMIs. It is wise that a borrower with a low monthly income selects a longer Personal Loan tenure to lower their EMI burden.
- Personal Loan Minimum Tenure
Like the maximum tenure for Personal Loans, the minimum tenure also differs from one lender to another. Most of the lenders have set a minimum tenure of 12 months. Such short loan tenures are ideal for borrowers with a high monthly income, as Personal Loans with such short tenure come with high-interest rates, resulting in high EMIs.
Most lenders also have a lock-in period of 6-12 months for the Personal Loan. It means that the borrower cannot prepay the Personal Loan before the lock-in period ends.
Important Factors to Consider While Choosing a Personal Loan Repayment Tenure
When you opt for a Personal Loan, the loan tenure directly affects your loan EMIs. Hence, you must choose your loan tenure carefully to make the most of it. Here are some important things that you should consider while selecting a loan tenure:
- Monthly Income
As you will have to pay the loan EMIs from your monthly income, it is important to choose the loan tenure accordingly. You should select a short loan tenure if your monthly income is high or a long repayment tenure if your monthly income is low.
- Existing Liabilities
Individuals with substantial existing debts are likely to have reduced disposal income. In such cases, it is best to choose the maximum tenure available.
- Interest Rates
The interest rate on Personal Loans can vary depending on the lender and your credit score. A longer repayment tenure will result in a higher overall interest cost, so it’s important to consider the interest rate when choosing a repayment period.
- Credit Score
Longer repayment tenure will also help you to improve your credit score as it will be considered a lower credit utilization ratio by credit bureaus which will ultimately increase your credit score.
- Financial Goals
Do you have any upcoming financial goals such as buying a car or a house, or starting a business? If so, it may be better to choose a shorter repayment tenure so that you can pay off the loan and free up funds for these other expenses.
Now that you know the maximum and minimum tenure of a Personal Loan, do your calculation to decide upon the Personal Loan repayment schedule you can afford. Also, you can utilize the Personal Loan EMI calculator. This online tool helps you instantly calculate the loan EMI, and therefore, plan your loan and repayment better.